Fertiliser Nationalism: On the Front Lines of the Urea Wars
China, India, and others are moving towards fertiliser self-sufficiency, heralding an era of fertiliser nationalism which could create further food supply volatility.
Co-written by Tom Campbell and Dirk van der Kley
Why does this matter?
Fertiliser nationalism blocks global flows of fertilisers which could create food supply volatility
It reduces the efficiency of fertiliser supply, meaning more fertiliser needs to be produced which damages the environment
It makes a transition to greener fertilisers harder as farmers and producers get hooked on subsidies and protectionism for polluting fertilisers
Introduction
It is an unpleasant truth that half the world is not able to feed themselves without synthetic nitrogen fertilisers. It is possibly the most single important invention underpinning human population growth.
Synthetic nitrogen fertilisers are manufactured in multiple countries and consumed widely in all agricultural environments. Thus, there is no sole supplier or purchaser concentration that typically lends itself to economic weaponization (think, US global control of the dollar, or PRC control of global mineral refining).
But now, fertiliser trade has become a point of contention for major nations, as countries try to reduce fertiliser import reliance or develop their own fertiliser manufacturing capabilities, and one country - China - enacts wide ranging export controls.
Explainer: Fertilisers
Fertiliser is a critical component of global food supply, providing plants with three essential nutrients required for growth: nitrogen (N), phosphorus (P), and potassium (K). Fertilisers broadly belong to one of these three categories, but a combination of all three fertiliser types is common agricultural practice.
Fertiliser use is growing. According to World Bank data, fertiliser consumption has doubled from 71 kg per hectare of arable land in 1976, to 142 kg in 2021. This mass uptake of fertilisers has facilitated significant population growth by boosting critical crop yields, while using less land to do so.
Fertiliser still has more work to do. Estimates for future food vary widely future food demand. One meta-study assessed food demand would increase by 35%-56% between 2010 to 2050, due to population growth and increased per-capita demand from a growing global middle class. This is at a time when available agricultural land is declining.
In a climate-change-affected world, this means fertilisers will be even more critical to feeding global populations or at least that is the perception of certain governments.
Synthetic nitrogen fertilisers poison the planet
Synthetic fertilisers cause serious environmental damage. They pollute the air. N fertiliser production is particularly energy intensive; global production of fertilisers accounts for about 1.4% of yearly GHG emissions. Given their low cost and positive effect on food production, greener alternatives have not been successful.
They pollute water. When fertilisers are applied to soils, excess runs off into soil and waterways. Leaching of excess nitrogen and phosphorus into water bodies sparks algal blooms which in turn decrease oxygen levels and contribute to mass die-offs of aquatic species.
They damage soils. Excess phosphorus in the soil can become fixed to organic materials or salts, resulting in a form of phosphate that is unusable by plants. As plants are able to take up less and less, farmers often over-fertilise to compensate, degrading the soil quality.
Consequently, many nations are seeking to re-evaluate their approach to fertiliser applications, targeting reductions of usage. The same countries simultaneously shore up domestic synthetic fertilisers supplies because too much fertiliser is better than not enough.
Geopolitical, climate risks and food demand growth increases fertiliser security focus
China is a major player in the global fertiliser market accounting for about 24% of global fertiliser use in 2023. They are a major producer of fertilisers, accounting for 41% of global phosphate mining and 40% of global urea production, and have been a major exporter, previously accounting for 15% of phosphatic exports and 13% of nitrogenous exports.
Since 2021 China has intermittently imposed restrictions on the export of fertilisers. The most recent, starting in June 2024, particularly applies to urea, a nitrogen-based fertiliser, and phosphates. PRC customs data highlights that urea exports have plunged in 2024.
Why is China controlling exports of fertiliser?
In some ways China’s export controls on fertilisers make no sense. China's total domestic agricultural production has risen steadily for three decades, and continues to do so. Similarly, the area allocated for sown crops has grown consistently over the past few decades. And China still produces more fertiliser than it uses.
Yet, all of that food security progress has been blunted by increasing Chinese consumer demand for variety and meat. This has led to an agricultural import boom in China, making the country the world’s leading importer of foodstuffs.
Source: This is directly copied from a CSIS report: It is worth a read
If you layer this over with the Chinese Communist Party’s obsession with stability and Xi Jinping’s understanding of how starvation leads to political unrest, then his 2013 statement on food security makes sense:
We “cannot allow the recent, steady gains we have achieved in grain production to lull us into a false sense of security. We should not forget about the suffering caused by previous famines just because we have managed to recover. Rather, we should recognize that the issue of food security is a red line that would trigger terrible consequences were it ever to be compromised . . . we must adhere to the national food security strategy that puts [China] first.”
Three other factors are likely driving the ban.
Increasing geopolitical instability, such as Russia’s invasion of Ukraine and Red Sea shipping crises has created volatility in prices and concerns about supply reliability.
Climate change could create an inflection point where yields start to decline. This would drive global fertiliser demand right when Chinese farmers need it most. A simple pre-existing example is a paper by Fu and colleagues that found that extreme rainfall contributed to an 8% reduction in Chinese rice crop yields per hectare between 1999-2012.
China has declining arable land (as opposed to increasing land being sown) due to urbanisation and unsustainable farming practices, in part resulting from overapplied fertiliser use. So farmers will need to squeeze more yield out of less land. This can only happen with large scale synthetic fertiliser use.
All of these are assessments about potential future trends, not predicated on existing food or fertiliser shortages in China. One could take this a step further. If China invades Taiwan, then the country will face real and widespread economic sanctions. Fertiliser self-sufficiency will be vital to feed its population.
Absolute self-sufficiency in food security is an improbable, if not impossible, goal, due to the sheer scale of China’s population compared to its arable land. Rather, the likely implication of China’s fertiliser export ban is that it will guarantee the basics and afford them greater bargaining power in trade over global food supply chains.
Global trends towards self-sufficiency
China is not alone in looking towards fertiliser self-sufficiency as a means to address concerns of food security. The European Union has targeted viable production of fertilisers in the EU as a key factor in achieving strategic autonomy, with aims of domestic production and ensuring security around gas markets. In May, the US announced new investment in domestic fertiliser production with U$83 million in 12 states in order to strengthen their supply chain.
India too is shifting towards self-sufficiency, with imports of fertilisers dropping by 71% between 2022 and 2023. This has been achieved by increased domestic production following the opening of new urea plants (HURL, RFCL) under the control of a government entity. This will be buoyed by the revitalisation of former urea production units (e.g. TFL) over the coming years, with aims of stopping urea imports by the end of 2025.
In 2023, India accounted for 80% of fertiliser use in South Asia, and is the second largest global consumer of fertilisers (after China). In trying to ensure food security, the Indian government has increased support for farmers in the form of fertiliser subsidies. A similar policy is being pursued in Indonesia, who have doubled the quantity of subsidised fertilisers to 9.5 million tons, while Kenya and the Philippines are also following suit.
Australia, who imports 90% of their urea, is making steps towards a domestic industry, with the construction (subsidised by a government loan) of an A$6 billion urea plant by Perdaman. As part of their published investment decision, the Northern Australian Infrastructure Facility cited a reduced import volume, increased reliability of fertiliser supply and increased food security as motivating factors. This is significant - production capacity is estimated to be sufficient to meet domestic urea demand.
What are the impacts?
Fertilisation nationalism affects global food supply in three ways.
If countries face shortages or price volatility of fertiliser due to nationalism-driven supply shocks, people starve or go underfed. The 2022 fertiliser price spike exposed the vulnerability of import-dependent countries to trade shocks; with subsequent high international food commodity prices associated with an increase of 118.7 million food insecure people in 2022. Fertilisers are a commodity, so supply chains would eventually rewire, but that period could see significant increases in food insecurity.
It could exacerbate GHG emissions from fertiliser production. If fertiliser demand and supply becomes less efficient then excess fertiliser will need to be produced to deliver the same amount to each farmer. This will lead to more GHG produced for each unit of fertiliser that goes into the soil.
It will make it harder to eventually transition away from synthetic nitrogen fertilisers as companies and farmers get used to government largesse and protection based around food security. Subsidies for agriculture have always been hard to remove.
Next week’s column will explore the alternatives to synthetic nitrogen fertilisers. Spoiler alert: there is a lot of work to be done.